TD Securities warns extreme short positioning in oil markets risks a rapid cover rally amid tightening supplies and misplaced demand fears.
Money managers hold record short positions in Brent crude, leaving them vulnerable to a squeeze as supply deficits deepen. TD Securities cites misplaced pessimism over China demand and an expected oil glut as key drivers behind the bearish bets, which now sit at levels last seen in late 2025 during surplus concerns.
The bank expects inventory erosion to accelerate through the summer, with Brent already breaking key resistance levels. Short exposure in managed money is at extremes, raising the likelihood of a rapid unwind if supply risks persist or demand forecasts improve.
TD Securities projects $10–15 per barrel of additional upside in the near term if short covering gains momentum. The shift could unfold faster than anticipated, driven by ongoing supply threats and forced position adjustments.